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In February, Texas factory activity fell amid increased uncertainty, after rising markedly in January. The production index plummeted more than 21 points to -9.1. The new orders index declined more than 11 points to -3.5, after January’s reading was the highest since April 2022. The capacity utilization index dropped nearly 14 points to -8.7, while the shipments index remained positive but slipped from 8.7 to 5.6.

Perceptions of manufacturing business conditions worsened in February, with the general business activity index plunging more than 22 points to -8.3, following a seven-month high in January. The company outlook index fell nearly 24 points to -5.2. Meanwhile, the outlook uncertainty index, which has been volatile in previous months, shot up in February, rising nearly 28 points after a near zero reading in January.

Labor market indicators suggested relatively flat employment and significantly shorter workweeks in February, with the employment index slipping to -0.7 from 2.2, while the hours worked index decreased by more than 16 points to -14.2, the lowest reading since mid-2020. Nearly 12% of firms reported net hiring, while roughly the same percentage (12.4%) noted net layoffs. Upward pressure on prices intensified in February, while wages fell slightly. The prices paid for raw materials index soared from 17.5 to 35.0, while the prices paid for finished goods index increased marginally, from 6.2 to 7.8. Meanwhile, the wages and benefits index edged down from 20.9 to 16.7.

The outlook for future manufacturing activity is still positive, but less optimistic than January’s reading. The future production index decreased from 44.8 to 28.3, with nearly 42% of firms expecting increases in output in the next six months. Similarly, the future general business activity index fell nearly 28 points to 7.7.